U-turn on the way: Govt prepares for climbdown on charity cap

Ministers appeared to be clearing the way for the latest in a long line of government U-turns today, amid an outcry over the cap on tax relief on charitable donations.

A Number 10 spokeswoman said a formal consultation on the implementation of the policy will be published in the summer, laying out various options.

David Cameron tried to calm the row down this afternoon insisting there was "plenty of time" before a decision had to be made.

he told Sky: "This was never going to be introduced until next year, plenty of time to get it right, plenty of time to consult and to listen but the key principle is that - more for charity and philanthropic giving? Yes. But allowing people to drive their tax rate down to 10% when they’re some of the richest people in the country? No."

Exchequer secretary David Gauke told the Today programme the government was "keen to explore" ways of protecting charities which rely on substantial donations.

There was a similar message yesterday from foreign secretary William Hague, who said the Treasury was "looking at" ways to reduce the impact of the measure on genuine charities.

The climbdown comes after a survey conducted by ComRes for the Charities Aid Foundation found 65% of Conservative and Liberal Democrat MPs want the chancellor to exempt charitable donations from the proposed cap.

The proposal, which was contained in the Budget, caps the amount someone can give to charity before incurring tax at £50,000 a year - or at 25% of their income - whichever is highest.

Ministers are concerned about individuals giving money to dubious charities abroad in a bid to cut their income tax liability.

The U-turn may involve having a separate limit on donations of 50% of a person's income or allow donors to roll over unused reliefs into future years.

To bolster its arguments, the Treasury released figures last night showing the full extent of tax avoidance among high earners.

The figures showed tax relief allowed Britain's richest six per cent to lower their tax rate to just ten per cent.

Almost 1,000 British taxpayers who earn over £1 million a year have a tax rate of less than 30% of their income.